Although people think the certain markets and economies are unpredictable, they are more foreseeable than one may realize. America’s economy hits rock bottom every ten years. Considering the last recession was 6 years ago, it looks like we have about 4 more years to prepare for it. That being said, you need to consider your investment priorities in 2015. Continue reading if you want to be prepared for the next recession.
Prepare For It
• One of the most flustering parts about a recession is the unexpectedness of it.
• Review the years from the last recession and look over your income/expenditures. What was life like then? Considering your current income, whether it is higher or lower, is your current life livable if a recession hits?
• Typically, the DOW will drastically drop one day. Like the plague, it will slowly start attacking people, and within a month, people (banks/homes/businesses) start dropping like flies.
• One of your investment priorities in 2015 should be to have a “recession” savings. It should be a regular savings account, but one specifically targeted to rescue you when worse comes to worse and the bottom bows out.
Prioritize Your Spending
• Another investment priority in 2015 should be to put all major purchases on the back burner. For an extensive planner, visit this website to help manage your spending priorities.
• Because our economy is booming again after the 2009 recession, it is easy to think that now is the time to buy that one thing you’ve been waiting for (a new kitchen, plastic surgery, a new home).
• The current state of the economy is all a tease. Because history repeats itself, we know that we will drop again in just a few short years. Will you still be able to pay for that new home? Will you still be paying off that surgery or kitchen?
• If you must splurge, try paying for something up front so it is not financed. Or, wait until it is on sale, and it is highly discounted.
• If you’re going to splurge, a good place to do that would be in your savings. You may not lose your job in the next recession, but you could suffer pay cuts, less hours, or fewer benefits. This is where your savings can save the day.
Become Debt Free
• Because you have some extra money at this time, get ahead of the game, and pay off your credit cards or remaining balances on loans.
• One investment priority in 2015 should be to make an extra payment or two. This will give you more cushions down the road if you are still paying something off when the next recession takes place.
• You may be wondering why you should be saving the most when you’re making more than years past.
• This is one of the most important investment priorities in 2015 – invest, and continue investing.
• Whether you have a 401(k) or begin renting out rooms in your home to pay off a mortgage, you are already on the right track for your investment priorities in 2015.
• Be careful at this time. It is easy to become panicked and want to get rid of your investments. This will be a great mistake.
• Mutual funds typically recovery after a recession, and will grow each time. After the next recession, they will be even higher.
• Make it an investment priority in 2015 to NOT sell.
• If you absolutely must sell, for say, retirement purposes, only sell a portion of it. It is highly unlikely that you will spend your entire retirement fund in one year.
• A small portion of your funds can cover you short term, so you are set for a couple of years.
• Dividends, or bonuses, may not necessarily hit bottom in the next recession, but they may actually grow over the next few years.
Buy When You’re Down
• Because businesses and companies are so desperate for business during a recession, prices will be cheaper than ever.
• In addition to daily purchases, investing during a recession is also at an all-time peak level.
• If you are able, a recession is the time to purchase homes for rental, stocks, and mutual funds. Specifically, rental properties will be significantly lower during this time.
• This is why it should be one of your investment priorities in 2015: save now so you have money to purchase when items are at their lowest.
• Don’t be intimidated by the high peaking prices. Astonishingly, you should still keep buying, especially with plans like 401(k).
• Also, don’t be intimidated by the cyclical lows. History shows that the market will rebound at a typically higher level.
Nuts and Bolts
One of your investment priorities in 2015 should be to prepare for the storm before it hits. This is the best way to make it through the trough.